Cheap Money, Cheap Labor…Pop Goes the Economy
by Glenn R. Jackson
The Bush Administration is putting on quite a show about the indicators of strength in the American economy. And given the economy’s performance being reflective of the President’s re-election chances that should be expected. Yet for all the cheering, a more objective view veritably screams that something is very wrong in our American economy.
Yes the economy has shown strength in sectors, but the growth is not uniform and is not translating into job growth. Much of the economy’s strength can be traced directly to the current 40-year low interest rates charged by the Federal Reserve Bank. As the economy stalled and slid into recession the Fed dropped their bank lending rates to historic lows and have left them there. Given Chairman Greenspan’s known fear of an over-heating economy, leaving these rates in place cannot be seen as a vote of confidence in a growing economy.
What is the catch then? Well, growth in the housing sector remains strong and is powering growth, but that is to be expected with this abundance of cheap (low interest) money. Nothing will fuel development like cheap money, and so it goes. Retail sales have been up and down, but generally are being seen as a positive with the American consumer still in the buying game. Yet a cash advance from Uncle Sam was surely “burning a hole” in the pocket of American consumers, so the cash advance was spent back into the economy almost as fast as it was received.
The upshot of this is that it is every bit as likely that the economy is in a “stimulus bubble” as it is in a real recovery.
What would complete a true picture of U.S. economic growth? Well, job growth of course. Which explains the eager expectations for every employment report and the shouts of joy for the March report of 308,000 new jobs. On its face this is great news, but hold the presses these numbers do not pass the sniff test, i.e. something is definitely fishy.
The Bureau of Labor Statistics reported front page that 308,000 new jobs were created in March, but a second glance showed that 296,000 jobs were for temporary or part-time work. In other words 296,000 Americans wanted full-time employment and could not find it. So they took the closest thing they could get, temporary and part-time employment. This trend is not indicative of strength; rather it shows an underlying weakness in job growth and the economy on whole.
Interestingly the unemployment rate ticked up to 5.7% with this “increase” in new jobs. Why? Well, the BLS said more people entered the job market looking for work (yes you must be “looking” for work to be counted as unemployed) and their entry caused the rate to increase. However, the “Employment Participation Rate,” a number derived by adding people working with those looking for work did not change, casting serious doubt on the BLS explanation of the higher unemployment rate.
Unfortunately none of this is indicative of solid job creation or growth. Even the anecdotal evidence seen and heard on various news media sites is showing more job losses, not job growth. Does anyone understand the problem with job growth in this country?
United States Congressman Tom Tancredo (R-CO) said, “We could create 10 million jobs by merely enforcing our immigration laws.” "When my colleagues get a letter from a constituent who has been displaced by foreign workers, they should write back to them and say, 'It is the policy of this government to displace you, to move you into a lower economic income category, because we believe in cheap labor and we believe the politics of open borders helps our party.'"
Without American job growth the American economy cannot maintain. Yet our politicians dither and our corporate CEO’s plot, and the average American shoulders the burden and glances over his shoulder to see what will be the next shoe to drop. Are you where you thought you would be at this time in your life? Are your expectations for the future what they were just a few short years ago?
It is becoming clearer with each passing month that the American economy is sitting on the bubble. Without real job growth this economic bubble will pop…can we survive a hard landing?
Glenn Jackson is Chairman of the American Reformation Project and Board Member of Hire American Citizens. Glenn was an organizer of American Jobs Coalition (organizations fighting against the American Worker Replacement Program). Glenn is also a former State Chairman for Buchanan 2000 Presidential campaign, and former state Chairman of the Georgia Freedom Party. Glenn holds an MA in Philosophy from Georgia State University in Atlanta.
© Glenn R. Jackson